ABSTRACT: This study was conducted in the south region of Punjab province of Pakistan.
Four districts were purposely selected to examine the determinants which critically instigate
the demand for borrowing micro finances in agriculture farming. The research also
attempted to analyze those socio-economic factors which established constraints for
acquiring loan from micro finance institutions (MFIs). Research design for this study was
primary study along with filed observations. A multistage sampling technique was applied to
collect primary data from selected districts through structured questionnaires after pretesting and seeking the expert opinions of MFIs officials. Tobit regression model and multiple
regression models were applied to estimate the impact of socioeconomic variables on the
microfinance accessibility and constraint level. The descriptive statistics of respondents
along with frequency and percentages distribution was also carried out. The results
illustrated that five determinants; gender, age, education, farm size and dependency ratio
had significant influence on the demand of microfinance. Farm experience and primary
occupation were non-significant. Income level of farmers was negatively correlated with the
demand of microfinance. The study proved that three constraints; far-away distance of MFIs,
complex lending procedure and high interest rates were top in the constraint list. The results
of multiple regression model explained that education level, land ownership and preferences
of farmers for informal finances have negative relationship and reduces the constraints to
access microfinance. The findings also revealed that for efficient allocation of resources,
MFIs preferred to disburse loan towards educated and young age farmers as they are more
inclined to use latest farm production technologies. The study concluded that farmer base
organizations (FBOs) should be registered with district agriculture extension office to
educate the farmers on loan acquisition process, record keeping and to encourage the saving
habit. A public- private co-integrated policy is needed to implement in south region of Punjab
province to effectively handle the rural financial constraints.
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